Adjustments of regulations FrieslandCampina member dairy farmers for better connection with the market

3 October 2016

The Board of the Zuivelcoöperatie FrieslandCampina U.A. and the Executive Board of Royal FrieslandCampina N.V. propose to the member dairy farmers to increase the outdoor grazing premium to 1.50 euro per 100 kg milk. It is also proposed to abolish the quantum allowance, to lower the seasonal payments to 0 euro and to adjust the reservation policy. The cooperative regulations of FrieslandCampina around milk payment composition and profit sharing are evaluated every three years and established for a three-year period. The adjustments will be discussed during the member meetings held in the fall of 2016. Other adjustments being discussed relate to the quality and sustainability programme Foqus planet.

Piet Boer, Chairman of Zuivelcoöperatie FrieslandCampina U.A.: “For the success and the continuity of the member dairy farms, the cooperative and the company it is important to keep performing well and to make improvements in the areas of chain quality, transparency, sustainability and outdoor grazing.”

Outdoor grazing premium increased to 1.50 euroIn order to further stimulate outdoor grazing, it is proposed to increase the outdoor grazing premium by 50 euro cents to 1.50 euro per 100 kg milk. This increase will be financed by the company. 77.9 percent of the 12,618 dairy farms of members of FrieslandCampina applied some form of outdoor grazing in 2015. This was 77.2 percent in 2014. The objective is to have 81.2 percent of the Dutch dairy farms supply meadow milk to FrieslandCampina in the year 2020. This was the level in 2012.

Abolishment of the quantum allowanceIt is also proposed to the members to abolish the quantum allowance. The initial purpose of the quantum allowance was to maintain a well-balanced composition of the membership and, moreover, to remain attractive to large dairy farms. The evaluation of the arrangement showed that it does no longer serve this purpose. It is also proposed to lower seasonal payments to 0 euro, because most farmers do not take it into account in running their business.

Invest in growth of brands and new sales marketsFor the years 2017-2019 the board and the executive board propose to pay 35 percent of the profit (based on the guaranteed price and after deduction of interest on member bonds and the profit to be attributed to minority interests) as a performance premium to the member dairy farmers and to pay 10 percent (was 20 percent) in the form of newly issued member bonds. This will lead to 55 percent (was 45 percent) being added to the company’s equity capital. This continued strengthening of solvency will support the strategy to continue to invest in brands, people and markets to optimize valorisation of member milk.